The ROI Assessment: The Cost Impact of Indirect Labor

In my last article (Human Labor Calculation for an ROI), I focused on the “direct labor” component of a ROI (return on investment) assessment for the acquisition of new technologies in warehouses and distribution centers.

In this article we focus on “indirect labor” component of an ROI assessment.

Surprisingly, this component is often not used, mostly because the use of people to set up the work for direct labor and process the results is not properly understood but it can uncover a large labor cost that the proposed technology acquisition can reduce or eliminate.

The starting point is to determine all the work elements and processes that are done to produce the assignments for direct labor’s use, and to process the work after the assignments have been completed. In the example above, some typical “before and after” processes in warehouses and distribution centers are listed. The first process precedes ...